FOOD INFLATION IN INDIA

During UPA-1, the increase in food grain prices (by around 53 per cent) was more than double the increase in the general price level, and also much higher than the general food index. But during UPA-2 thus far, food grain prices have moved along with the general price index, while the composite food index has moved much faster, rising by nearly 60 per cent in just four years.

The major elements of this are fruits and vegetables, sugar, milk, eggs meat and fish and edible oils, as indicated in Chart 5. In the four years of UPA-2, prices of fruits and vegetables and milk have gone up by close to 60 per cent, while prices of eggs, meat and fish have more than doubled. This indicates that the nature of food price inflation has changed to some extent.

In the past four years of the UPA-2 Government, prices of both cereals and pulses have increased by nearly 40 per cent – still very high rates for a dominantly poor country. (It is worth noting that lower increases of food inflation have been associated with increased public diasaffection and widespread protests in countries at much higher levels of per capita incomes like Brazil.) Further, in the first few months of 2013, cereal prices have started rising faster than other food prices once again, suggesting that this may become an important concern very quickly.

While the central government has been anxious to score political points by belatedly trying to pass a flawed Food Security Bill that has been pending for years, it has done very little to revive the Public Distribution System and ensure that it is more effective in its functioning. This is in stark contrast to some state governments that have already shown that it is possible to have an effective system of public procurement and distribution of food grain and even other food items (such as Tamil Nadu and Kerala) and others that have recently expanded and reformed their systems (such as Chhattisgarh and Orissa).